From hierarchy to network
Why are so many senior executives disappointed with the returns from their digital investments and Agile initiatives? They have recruited top talent. They have set clear goals. They have created Agile teams. They have trained their staff. They have spent a ton on coaches and consultants. Yet major gains still prove elusive. What’s going wrong down there?
The final hurdle that often blocks such conversations from even understanding the problem, let alone solving it, is the realization that the problem is not something “down there”. It means a change to the firm itself: a shift of the entire management structure from a steep hierarchy of authority to a horizontal network of competence, as shown in Figure 1.
Thus the future of work in the 21st century isn’t merely about setting up teams. The firm itself needs to become a team of teams, in which ideas can come from anywhere and be assessed on their merits. It will be hard for a senior management to solve their problem until the firm moves towards a network arrangement, as General Stan McChrystal explained in his great book, Team of Teams: New Rules of Engagement for a Complex World (Portfolio, 2015)
There are eight keys to making that happen.
1. Getting Focused On A Compelling Goal
2. Ferocious Customer Focus
3. Making Sure The Teams Are Truly Agile, Not Just Going Through The Motions.
4. The Interfaces Between Teams Must Be Defined
5. Real-Time External Measures Must Be In Place
6. Inter-Team Rivalries Must Be Dissipated
7. A Shift From Commander To Gardener
8. Leadership Everywhere
The firm must have a clear and compelling goal. Traditional managers are correct in thinking that a network will never work in a bureaucracy. That’s because work in a bureaucracy is dominated by rules, procedures and instructions from a boss. To function effectively, a network must be driven by a compelling shared goal that each team itself interprets and exploits opportunities as they spot them. Once that obsession is universally shared, it matters less who is delivering value. What’s important is the fact of delivery. As in a basketball team, it’s less important who scores the goal: what matters is whether the goal is scored.
In the private sector, this generally means an intense focus on adding more value to customers in a sustainable way. In the public sector, it generally means a goal that transcends the goal of any individual unit. The top sets direction in terms of how and where that goal is going to be pursued. Within the scope of that direction, it should be ultra-easy for anyone in the organization to get resources to explore new ideas.
For example, General Stan McChrystal in Iraq in 2003 had a collection of individual high-performing teams, with the very best weapons, but because of tensions between individual teams—the Army, Air Force, the CIA, the NSA and so on—the collectivity couldn’t move fast enough to deal with a low-tech ill-educated bunch of terrorists. The first step was to get agreement that the oveall mission had precedence over the interests of those separate organizations.
Vague goals like “meeting the needs of all the stakeholders” won’t get the job done. When firms embrace such blurry goals, the risk is that within the firm itself, the goal of the firm has become undiscussable. That will be an unpropitious setting for launching a network: if the teams are unclear on the goal, the risk of confusion is considerable.
The network will comprise a set of small self-organizing teams.. “Successful movements,” says John Hagel, the director of Deloitte’s Center for the Edge, “are all organized around small, local action groups, who work together to achieve impact in very different contexts.”
A network arrangement should only be attempted if the work is already being carried out by Agile teams that are routinely getting all their work done within each short cycle and that have a clear line of sight to the ultimate customer. If the work is being carried out in bureaucratic arrangements with big plans that cannot be continuously monitored on an ongoing basis, then any move towards a network should be postponed: the firm is not ready to attempt a network.
The shift will be dramatic: from a giant monolithic battleship to a fleet of agile speedboats, as shown in Figure 2.
From hierarchy to network
Each team should not only be responsible for a clearly defined piece of the work, but also have clearly defined interfaces with other teams in the network specifying what matters need to be communicated and how. The organization should be able function like a set of iPhone apps that interact directly with each other, without getting permission of any hierarchy to do so, as was required in an old PC, as shown in Figure 3.
From old PC to iPhone app
Real-time external measures for each team need to be in place before any team begins work, not measures that concocted later to make the team look good.
At Amazon, for instance, work doesn’t begin until the team has generated, inter alia, an equation that spells out the measures that will tell whether the activity is having the benefits for customers that the team hopes that it will. In this way, customer benefits can be measured and tracked in real time. Without such measures, one will know if something is going wrong until it’s too late.
This is very different from traditional management, where activities and initiatives are often launched without any quantified idea of how the eventual impact on customers will be measured. Reliance is put on a boss to monitor progress. As a result, many activities are launched that customers don’t eventually need or want or that do not constitute viable business opportunities.
The network approach is very much in the spirit of “trust, but verify,” a phrase that became internationally known in English after Suzanne Massie, an American scholar, taught it to President Ronald Reagan, who used it in the context of nuclear disarmament discussions with the Soviet Union.
The challenge for McChrystal in Iraq was to achieve trust and purpose in a large group of teams and agencies who all had their own agendas. McChrystal could see that he had to eliminate “the deeply rooted system of secrecy, clearances, and inter-force rivalries.” He had to reverse the principle of limiting information on a “need to know” basis to one where “everyone knows everything”, so that “every man and woman in our command understood his or her role within the complex system that represented all of our undertakings. Everyone needed to be intimately familiar with every branch of the organization, and personally invested in the outcome.”
So long as there are managers defending their program and their budget and their people, ahead of pursuing the organization’s overall goal, the organization will be under-performing. The battles between units will go on. No battle will ever be decisive. Each decision is provisional—until the next battle. To help break this cycle, McChrystal enabled staff interchanges between units, so that the battles shifted towards the real external enemy.
Most important, McChrystal had to unlearn what it means to be a leader. A great deal of what he thought he knew about how the world worked and his role as a commander had to be discarded.
“I began to view effective leadership in the new environment as more akin to gardening than chess,” he writes. “The move-by-move control that seemed natural to military operations proved less effective than nurturing the organization— its structure, processes, and culture— to enable the subordinate components to function with ‘smart autonomy.’ It wasn’t total autonomy, because the efforts of every part of the team were tightly linked to a common concept for the fight, but it allowed those forces to be enabled with a constant flow of ‘shared consciousness’ from across the force, and it freed them to execute actions in pursuit of the overall strategy as best they saw fit. Within our Task Force, as in a garden, the outcome was less dependent on the initial planting than on consistent maintenance. Watering, weeding, and protecting plants from rabbits and disease are essential for success. The gardener cannot actually ‘grow’ tomatoes, squash, or beans— she can only foster an environment in which the plants do so.”
From machine to garden
In 20th century management, leadership was a function situated at the top of the organization. Power trickled down. Big leaders appointed little leaders and so on, down the chain of command.
In a network arrangement, leadership is needed across the whole organization. The network doesn’t contain the small groups: it is the sum of the small groups. The small groups are not groups within the organization: conceptually, they are the organization. Because teams are self-organizing, leadership is needed throughout the firm, not just the top.
Networks Are The Future
The progress made by Amazon, Haier and other organizations towards running the thinking part of large firm as networks is remarkable. The lesson is clear. Hierarchical structures are for 20th century bureaucracies. In the 21st century, the future for market-leading firms lies in networks.
For those who have experienced a well-run network, this kind of arrangement can be uplifting. Instead of a boss peering over your shoulder and second-guessing your every move, and constantly seeking permission up a steep chain of command, you now have have a clear line of sight to those for whom the work is being done and can get on with the job. Work can become meaningful in a way that isn’t possible in a steep hierarchy. The spaciousness of it, the clarity, the energy, the excitement, can make it an experience of a lifetime. You experience the thrill of adding value to the lives of others.
And read also:
Picturing 21st Century Management
Don’t Reorganize: Run Your Firm As A Network
Retired Army General Stanley McChrystal
My book, “The Age of Agile” was published by HarperCollins in 2018 and was selected by the Financial Times as one of the best business books of 2018. I consult with